Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-198735
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GS Finance Corp.
$5,660,000
Leveraged S&P Banks
Select Industry Index-Linked Notes due 2018
guaranteed
by
The Goldman Sachs Group, Inc.
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The notes do not bear interest.
The amount that you will be paid on your notes on the stated maturity date (July 17, 2018)
is based on the performance of the S&P Banks Select Industry Index as measured from the trade date (January 12, 2017) to and including the determination date (July 12, 2018). If the final index level on the determination date is greater than the
initial index level of 954.40, the return on your notes will be positive, subject to the maximum settlement amount of $1,273.00 for each $1,000 face amount of your notes.
If the final index level is less than the initial index level, the return
on your notes will be negative.
To determine your payment at maturity, we will calculate the index return, which is the percentage increase or
decrease in the final index level from the initial index level. On the stated maturity date, for each $1,000 face amount of your notes, you will receive an amount in cash equal to:
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if the index return is
positive
(the final index level is
greater than
the initial index level), the
sum
of (i) $1,000
plus
(ii) the
product
of (a) $1,000
times
(b) 3.0
times
(c) the index return, subject to the maximum settlement amount; or
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if the index return is
zero
or
negative
(the final index level is
equal to or less than
the initial index level), the
sum
of
(i) $1,000
plus
(ii) the
product
of (a) $1,000
times
(b) the index return.
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You
should read the disclosure herein to better understand the terms and risks of your investment, including the credit risk of GS Finance Corp. and The Goldman Sachs Group, Inc. See page PS-12.
The estimated value of your notes at the time the terms of your notes are set on the trade date is equal to approximately $975 per $1,000 face amount. For a
discussion of the estimated value and the price at which Goldman, Sachs & Co. would initially buy or sell your notes, if it makes a market in the notes, see the following page.
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Original issue date:
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January 20, 2017
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Original issue price:
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100.00% of the face amount
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Underwriting discount:
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1.35% of the face amount
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Net proceeds to the issuer:
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98.65% of the face amount
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Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or
passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. The notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor
are they obligations of, or guaranteed by, a bank.
Goldman, Sachs & Co.
Pricing Supplement No. 1,018 dated January 12, 2017.
The issue price, underwriting discount and net proceeds listed above relate to the notes we sell initially. We may
decide to sell additional notes after the date of this pricing supplement, at issue prices and with underwriting discounts and net proceeds that differ from the amounts set forth above. The return (whether positive or negative) on your investment in
notes will depend in part on the issue price you pay for such notes.
GS Finance Corp. may use this prospectus in the initial sale of the
notes. In addition, Goldman, Sachs & Co. or any other affiliate of GS Finance Corp. may use this prospectus in a market-making transaction in a note after its initial sale.
Unless GS Finance Corp. or its agent informs the purchaser
otherwise in the confirmation of sale, this prospectus is being used in a market-making transaction.
Estimated Value of Your Notes
The estimated value of your notes at the time the terms of your notes are set on the trade date (as
determined by reference to pricing models used by Goldman, Sachs & Co. (GS&Co.) and taking into account our credit spreads) is equal to approximately $975 per $1,000 face amount, which is less than the original issue price. The value of
your notes at any time will reflect many factors and cannot be predicted; however, the price (not including GS&Co.
s customary bid and ask spreads) at which GS&Co. would initially buy or sell notes (if it makes a
market, which it is not obligated to do) and the value that GS&Co. will initially use for account statements and otherwise is equal to approximately $990 per $1,000 face amount, which exceeds the estimated value of your notes as determined by
reference to these models. The amount of the excess will decline on a straight line basis over the period from the trade date through April 12, 2017.
About Your Prospectus
The notes are part of the Medium-Term Notes, Series E program of GS Finance Corp. and are fully and unconditionally guaranteed by The Goldman Sachs Group, Inc. This prospectus includes this pricing supplement and
the accompanying documents listed below. This pricing supplement constitutes a supplement to the documents listed below and should be read in conjunction with such documents:
The information in this pricing supplement supersedes any conflicting information
in the documents listed above. In addition, some of the terms or features described in the listed documents may not apply to your notes.
PS-2
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Leveraged S&P Banks Select Industry Index-Linked Notes due 2018
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INVESTMENT THESIS
You
should be willing to forgo:
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gains greater than a maximum settlement amount of 127.30% of the face amount in exchange for 3x leveraged upside participation if the underlier return is
positive.
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interest payments and risk losing your entire investment for the potential to earn 300.00% of any positive underlier return up to a maximum settlement amount of
127.30% of the face amount.
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Your maximum return on your notes will not be greater than 27.30%, and you could lose all or a portion of
your investment if the underlier return is negative.
DETERMINING THE CASH SETTLEMENT AMOUNT
At maturity, for each $1,000 face amount, the investor will receive (in each case as a percentage of the face amount):
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if the final underlier level is greater than 100.00% of the initial underlier level, 100.00%
plus
300.00% times the underlier return, subject to a maximum
settlement amount of 127.30%; or
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if the final underlier level is
equal to
or
less than
the initial underlier level, 100.00%
minus
1.00% for every 1.00% that the final
underlier level has declined below the initial underlier level
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If the final underlier level declines below the initial underlier
level, the return on the notes will be negative and the investor could lose their entire investment in the notes.
KEY TERMS
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Issuer:
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GS Finance Corp.
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Guarantor:
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The Goldman Sachs Group, Inc.
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Underlier:
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The S&P Banks Select Industry Index (Bloomberg symbol, SPSIBK Index)
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Face Amount:
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$5,660,000 in the aggregate; each note will have a face amount equal to $1,000
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Trade Date:
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January 12, 2017
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Settlement Date:
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January 20, 2017
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Determination Date:
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July 12, 2018
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Stated Maturity Date:
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July 17, 2018
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Initial Underlier Level:
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954.40
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Final Underlier Level:
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The closing level of the underlier on the determination date
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Underlier Return:
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The
quotient
of (i) the final underlier level
minus
the initial underlier level
divided by
(ii) the initial underlier level, expressed as a positive or negative
percentage
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Upside Participation Rate:
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300.00%
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Maximum Settlement Amount:
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$1,273.00
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Cap Level:
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109.10% of the initial underlier level
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CUSIP/ISIN:
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40054KUB0 / US40054KUB06
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PS-3
HYPOTHETICAL PAYMENT AT MATURITY
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Hypothetical Final
Underlier Level (as % of
Initial Underlier Level)
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Hypothetical Cash
Settlement Amount
(as % of
Face Amount)
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150.000%
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127.300%
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140.000%
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127.300%
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130.000%
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127.300%
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120.000%
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127.300%
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110.000%
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127.300%
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109.100%
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127.300%
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106.000%
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118.000%
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104.000%
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112.000%
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102.000%
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106.000%
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100.000%
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100.000%
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75.000%
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75.000%
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50.000%
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50.000%
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25.000%
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25.000%
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0.000%
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0.000%
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RISKS
Please read the section entitled Additional Risk Factors Specific to Your Notes of this pricing supplement as well as the risks and considerations
described in the accompanying prospectus dated December 22, 2015, in the accompanying prospectus supplement dated December 22, 2015, under Additional Risk Factors Specific to the Underlier-Linked Notes in the accompanying
product supplement no. 28 dated December 22, 2015, and under Additional Risk Factors Specific to the Notes in the accompanying general terms supplement no. 24 dated December 22, 2015.
PS-4
SUMMARY INFORMATION
We refer to the notes we are offering by this pricing supplement as the offered notes or the
notes. Each of the offered notes has the terms described below. Please note that in this pricing supplement, references to GS Finance Corp., we, our and us mean only GS Finance Corp.
and do not include its subsidiaries or affiliates, references to The Goldman Sachs Group, Inc., our parent company, mean only The Goldman Sachs Group, Inc. and do not include its subsidiaries or affiliates and references to Goldman
Sachs mean The Goldman Sachs Group, Inc. together with its consolidated subsidiaries and affiliates, including us. Also, references to the accompanying prospectus mean the accompanying prospectus, dated December 22, 2015,
references to the accompanying prospectus supplement mean the accompanying prospectus supplement, dated December 22, 2015, for Medium-Term Notes, Series E, references to the accompanying general terms supplement no.
24 mean the accompanying general terms supplement no. 24, dated December 22, 2015, and references to the accompanying product supplement no. 28 mean the accompanying product supplement no. 28, dated December 22, 2015, in
each case of GS Finance Corp. and The Goldman Sachs Group, Inc. The notes will be issued under the senior debt indenture, dated as of October 10, 2008, as supplemented by the First Supplemental Indenture, dated as of February 20, 2015,
each among us, as issuer, The Goldman Sachs Group, Inc., as guarantor, and The Bank of New York Mellon, as trustee. This indenture is referred to as the GSFC 2008 indenture in the accompanying prospectus supplement. This section is meant
as a summary and should be read in conjunction with the section entitled General Terms of the Underlier-Linked Notes on page S-35 of the accompanying product supplement no. 28 and Supplemental Terms of the Notes on page S-15
of the accompanying general terms supplement no. 24. Please note that certain features, as noted below, described in the accompanying product supplement no. 28 and general terms supplement no. 24 are not applicable to the notes. This pricing
supplement supersedes any conflicting provisions of the accompanying product supplement no. 28 or the accompanying general terms supplement no. 24.
Key Terms
Issuer:
GS Finance Corp.
Guarantor:
The Goldman Sachs Group, Inc.
Underlier:
the S&P Banks Select Industry Index (Bloomberg
symbol, SPSIBK Index), as published by Standard & Poors Financial Services LLC (Standard & Poors)
Specified currency:
U.S. dollars ($)
Terms to be specified in accordance with the
accompanying product supplement no. 28:
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type of notes: notes linked to a single underlier
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exchange rates: not applicable
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averaging dates: not applicable
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redemption right or price dependent redemption right: not applicable
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cap level: yes, as described below
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buffer level: not applicable
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interest: not applicable
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Face amount:
each note will have a face amount of $1,000; $5,660,000 in the aggregate for all the offered notes; the aggregate face amount of the offered notes may be increased if the issuer, at its sole option, decides to sell an additional amount of the
offered notes on a date subsequent to the date of this pricing supplement
Purchase at amount other than face amount:
the amount we will
pay you at the stated maturity date for your notes will not be adjusted based on the issue price you pay for your notes, so if you acquire notes at a premium (or discount) to face amount and hold them to the stated maturity date, it could affect
your investment in a number of ways. The return on your investment in such notes will be lower (or higher) than it would have been had you purchased the notes at face amount. Also, the cap level would be triggered at a lower (or higher) percentage
return than indicated below, relative to your initial investment. See Additional Risk Factors Specific to Your Notes If You Purchase Your Notes at a Premium to Face
PS-5
Amount, the Return on Your Investment Will Be Lower Than the Return on Notes Purchased at Face Amount and the Impact of Certain Key Terms of the Notes Will be Negatively Affected on page
PS-14 of this pricing supplement.
Supplemental discussion of U.S. federal income tax consequences:
you will be obligated pursuant to the terms
of the notes in the absence of a change in law, an administrative determination or a judicial ruling to the contrary to characterize each note for all tax purposes as a pre-paid derivative contract in respect of the underlier, as
described under Supplemental Discussion of Federal Income Tax Consequences on page S-42 of the accompanying product supplement no. 28. Pursuant to this approach, it is the opinion of Sidley Austin
LLP
that upon the sale,
exchange or maturity of your notes, it would be reasonable for you to recognize capital gain or loss equal to the difference, if any, between the amount of cash you receive at such time and your tax basis in your notes. Pursuant to Treasury
regulations, Foreign Account Tax Compliance Act (FATCA) withholding (as described in United States Taxation Taxation of Debt Securities Foreign Account Tax Compliance Act (FATCA) Withholding in the accompanying prospectus)
will generally apply to obligations that are issued on or after July 1, 2014; therefore, the notes will generally be subject to FATCA withholding. However, according to published guidance, the withholding tax described above will not apply to
payments of gross proceeds from the sale, exchange or other disposition of the notes (including payment at maturity) made before January 1, 2019.
Cash settlement amount (on the stated maturity date):
for each $1,000 face amount of your notes, we will pay you on the stated maturity date an amount in cash equal to:
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if the final underlier level is
greater than
or
equal to
the cap level, the maximum settlement amount;
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if the final underlier level is
greater than
the initial underlier level but
less than
the cap level, the
sum
of (1) $1,000
plus
(2) the
product
of (i) $1,000
times
(ii) the upside participation rate
times
(iii) the underlier return; or
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if the final underlier level is
equal to
or
less than
the initial underlier level, the
sum
of (1) $1,000
plus
(2) the
product
of (i) $1,000
times
(ii) the underlier return
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Initial underlier level (set on
the trade date):
954.40
Final underlier level:
the closing level of the underlier on the determination date, except in the limited
circumstances described under Supplemental Terms of the Notes Consequences of a Market Disruption Event or a Non-Trading Day on page S-22 of the accompanying general terms supplement no. 24 and subject to adjustment as provided
under Supplemental Terms of the Notes Discontinuance or Modification of an Underlier on page S-26 of the accompanying general terms supplement no. 24
Underlier return:
the
quotient
of (1) the final underlier level
minus
the initial underlier level
divided
by (2) the initial underlier
level, expressed as a percentage
Upside participation rate:
300.00%
Cap level (set on the trade date):
109.10% of the initial underlier level
Maximum settlement amount
(set on the trade date):
$1,273.00
Trade date:
January 12, 2017
Original issue date (settlement date) (set on the trade date):
January 20, 2017
Determination
date (set on the trade date):
July 12, 2018, subject to adjustment as described under Supplemental Terms of the Notes Determination Date on page S-16 of the accompanying general terms supplement no. 24
Stated maturity date (set on the trade date):
July 17, 2018, subject to adjustment as described under Supplemental Terms of the Notes
Stated Maturity Date on page S-15 of the accompanying general terms supplement no. 24
No interest:
the offered notes do not bear
interest
No listing:
the offered notes will not be listed on any securities exchange or interdealer quotation system
No redemption:
the offered notes will not be subject to redemption right or price dependent redemption right
PS-6
Closing level:
as described under Supplemental Terms of the Notes Special Calculation Provisions
Closing Level on page S-30 of the accompanying general terms supplement no. 24
Business day:
as described under
Supplemental Terms of the Notes Special Calculation Provisions Business Day on page S-29 of the accompanying general terms supplement no. 24
Trading day:
means a day on which the respective principal securities markets for all of the underlier stocks are open for trading, the underlier sponsor is open for business and the underlier is calculated
and published by the underlier sponsor. Although the underlier sponsor may publish the underlier level on a day when one or more of the principal securities markets for the underlier stocks are closed, that day would not be a trading day for
purposes of the underlier.
Use of proceeds and hedging:
as described under Use of Proceeds and Hedging on page
S-40 of the accompanying product supplement no. 28
ERISA:
as described under Employee Retirement Income Security Act on page
S-49 of the accompanying product supplement no. 28
Supplemental plan of distribution; conflicts of interest:
as described under
Supplemental Plan of Distribution on page S-50 of the accompanying product supplement no. 28 and Plan of Distribution Conflicts of Interest on page 78 of the accompanying prospectus; GS Finance Corp. estimates that its
share of the total offering expenses, excluding underwriting discounts and commissions, will be approximately $10,000.
GS Finance Corp. will
sell to Goldman, Sachs & Co. (GS&Co.), and GS&Co. will purchase from GS Finance Corp., the aggregate face amount of the offered notes specified on the front cover of this pricing supplement. GS&Co. proposes initially
to offer the notes to the public at the original issue price set forth on the cover page of this pricing supplement. The underwriting discount set forth on the cover page of this pricing supplement per $1,000 face amount is comprised of $1.00 of
underwriting fees and $12.50 of selling commission. GS&Co. is an affiliate of GS Finance Corp. and The Goldman Sachs Group, Inc. and, as such, will have a conflict of interest in this offering of notes within the meaning of Financial
Industry Regulatory Authority, Inc. (FINRA) Rule 5121. Consequently, this offering of notes will be conducted in compliance with the provisions of FINRA Rule 5121. GS&Co. will not be permitted to sell notes in this offering to an account over
which it exercises discretionary authority without the prior specific written approval of the account holder.
We will deliver the notes against payment
therefor in New York, New York on January 20, 2017, which is the fifth scheduled business day following the date of this pricing supplement and of the pricing of the notes. Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the
secondary market generally are required to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade notes on any date prior to three business days before delivery will
be required, by virtue of the fact that the notes will settle in five business days (T + 5), to specify alternative settlement arrangements to prevent a failed settlement.
We have been advised by GS&Co. that it intends to make a market in the notes. However, neither GS&Co. nor any of our other affiliates that makes a market is obligated to do so and any of them may stop doing
so at any time without notice. No assurance can be given as to the liquidity or trading market for the notes.
Calculation agent:
GS&Co.
CUSIP no.:
40054KUB0
ISIN
no.:
US40054KUB06
FDIC
: the notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other
governmental agency, nor are they obligations of, or guaranteed by, a bank
PS-7
HYPOTHETICAL EXAMPLES
The following table and chart are provided for purposes of illustration only. They should not be taken as an indication or prediction of future investment results
and merely are intended to illustrate the impact that the various hypothetical underlier levels on the determination date could have on the cash settlement amount at maturity assuming all other variables remain constant.
The examples below are based on a range of final underlier levels that are entirely hypothetical; the underlier level on any day throughout the life of the notes,
including the final underlier level on the determination date, cannot be predicted. The underlier has been highly volatile in the past meaning that the underlier level has changed considerably in relatively short periods and its
performance cannot be predicted for any future period.
The information in the following examples reflects hypothetical rates of return on the offered
notes assuming that they are purchased on the original issue date at the face amount and held to the stated maturity date. If you sell your notes in a secondary market prior to the stated maturity date, your return will depend upon the market value
of your notes at the time of sale, which may be affected by a number of factors that are not reflected in the table below, such as interest rates, the volatility of the underlier, the creditworthiness of GS Finance Corp., as issuer, and the
creditworthiness of The Goldman Sachs Group, Inc., as guarantor. In addition, the estimated value of your notes at the time the terms of your notes are set on the trade date (as determined by reference to pricing models used by GS&Co.) is less
than the original issue price of your notes. For more information on the estimated value of your notes, see Additional Risk Factors Specific to Your Notes The Estimated Value of Your Notes At the Time the Terms of Your Notes Are Set On
the Trade Date (as Determined By Reference to Pricing Models Used By GS&Co.) Is Less Than the Original Issue Price Of Your Notes on page PS-12 of this pricing supplement. The information in the table also reflects the key terms and
assumptions in the box below.
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Key Terms and Assumptions
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Face amount
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$1,000
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Upside participation rate
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300.00%
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Cap level
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109.10% of the initial underlier level
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Maximum settlement amount
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$1,273.00
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Neither a market disruption event nor a non-trading day occurs on the originally scheduled determination date
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No change in or affecting any of the underlier stocks or the method by which the underlier sponsor calculates the underlier
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Notes purchased on original issue date at the face amount and held to the stated maturity date
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For these reasons, the actual performance of the underlier over the life of your notes, as well as the amount payable at
maturity, if any, may bear little relation to the hypothetical examples shown below or to the historical underlier levels shown elsewhere in this pricing supplement. For information about the historical levels of the underlier during recent periods,
see The Underlier Historical Closing Levels of the Underlier below. Before investing in the offered notes, you should consult publicly available information to determine the levels of the underlier between the date of this pricing
supplement and the date of your purchase of the offered notes.
Also, the hypothetical examples shown below do not take into account the effects of
applicable taxes. Because of the U.S. tax treatment applicable to your notes, tax liabilities could affect the after-tax rate of return on your notes to a comparatively greater extent than the after-tax return on the underlier stocks.
The levels in the left column of the table below represent hypothetical final underlier levels and are expressed as percentages of the initial underlier level. The
amounts in the right column represent the hypothetical cash settlement amounts, based on the corresponding hypothetical final underlier level, and are expressed as percentages of the face amount of a note (rounded to the nearest one-thousandth of a
percent). Thus, a hypothetical cash settlement amount of 100.000% means that the value of the cash
PS-8
payment that we would deliver for each $1,000 of the outstanding face amount of the offered notes on the stated maturity date would equal 100.000% of the face amount of a note, based on the
corresponding hypothetical final underlier level and the assumptions noted above.
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Hypothetical Final Underlier Level
(as Percentage of Initial Underlier Level)
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Hypothetical Cash Settlement Amount
(as Percentage of Face Amount)
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150.000%
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127.300%
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140.000%
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127.300%
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130.000%
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127.300%
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120.000%
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127.300%
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110.000%
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127.300%
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109.100%
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127.300%
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106.000%
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118.000%
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104.000%
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112.000%
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102.000%
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106.000%
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100.000%
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100.000%
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75.000%
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75.000%
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50.000%
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50.000%
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25.000%
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25.000%
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0.000%
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0.000%
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If, for example, the final underlier level were determined to be 25.000% of the initial underlier level, the cash settlement amount
that we would deliver on your notes at maturity would be 25.000% of the face amount of your notes, as shown in the table above. As a result, if you purchased your notes on the original issue date at the face amount and held them to the stated
maturity date, you would lose 75.000% of your investment (if you purchased your notes at a premium to face amount you would lose a correspondingly higher percentage of your investment). If the final underlier level were determined to be 0.000% of
the initial underlier level, you would lose your entire investment in the notes. In addition, if the final underlier level were determined to be 150.000% of the initial underlier level, the cash settlement amount that we would deliver on your notes
at maturity would be capped at the maximum settlement amount, or 127.300% of each $1,000 face amount of your notes, as shown in the table above. As a result, if you held your notes to the stated maturity date, you would not benefit from any increase
in the final underlier level of greater than 109.100% of the initial underlier level.
The following chart shows a graphical illustration of the
hypothetical cash settlement amounts that we would pay on your notes on the stated maturity date, if the final underlier level were any of the hypothetical levels shown on the horizontal axis. The hypothetical cash settlement amounts in the chart
are expressed as percentages of the face amount of your notes and the hypothetical final underlier levels are expressed as percentages of the initial underlier level. The chart shows that any hypothetical final underlier level of less than 100.000%
(the section left of the 100.000% marker on the horizontal axis) would result in a hypothetical cash settlement amount of less than 100.000% of the face amount of your notes (the section below the 100.000% marker on the vertical axis) and,
accordingly, in a loss of principal to the holder of the notes. The chart also shows that any hypothetical final underlier level of greater than or equal to 109.100% (the section right of the 109.100% marker on the horizontal axis) would result in a
capped return on your investment.
PS-9
The cash settlement amounts shown above are entirely hypothetical; they are based on market prices for the underlier stocks that
may not be achieved on the determination date and on assumptions that may prove to be erroneous. The actual market value of your notes on the stated maturity date or at any other time, including any time you may wish to sell your notes, may bear
little relation to the hypothetical cash settlement amounts shown above, and these amounts should not be viewed as an indication of the financial return on an investment in the offered notes. The hypothetical cash settlement amounts on notes held to
the stated maturity date in the examples above assume you purchased your notes at their face amount and have not been adjusted to reflect the actual issue price you pay for your notes. The return on your investment (whether positive or negative) in
your notes will be affected by the amount you pay for your notes. If you purchase your notes for a price other than the face amount, the return on your investment will differ from, and may be significantly lower than, the hypothetical returns
suggested by the above examples. Please read Additional Risk Factors Specific to the Underlier-Linked Notes The Market Value of Your Notes May Be Influenced by Many Unpredictable Factors on page S-32 of the accompanying product
supplement no. 28.
Payments on the notes are economically equivalent to the amounts that would be paid on a combination of other instruments. For
example, payments on the notes are economically equivalent to a combination of an interest-bearing bond bought by the holder and one or more options entered into between the holder and us (with one or more implicit option premiums paid over time).
The discussion in this paragraph does not modify or affect the terms of the notes or the U.S. federal income tax treatment of the notes, as described elsewhere in this pricing supplement.
PS-10
We cannot predict the actual final underlier level or what the market value of your notes will be on any particular trading day, nor can we predict the relationship between the underlier level and the market
value of your notes at any time prior to the stated maturity date. The actual amount that you will receive, if any, at maturity and the rate of return on the offered notes will depend on the actual final underlier level determined by the calculation
agent as described above. Moreover, the assumptions on which the hypothetical returns are based may turn out to be inaccurate. Consequently, the amount of cash to be paid in respect of your notes, if any, on the stated maturity date may be very
different from the information reflected in the table and chart above.
PS-11
ADDITIONAL RISK FACTORS SPECIFIC TO YOUR NOTES
An investment in your notes is subject to the risks described below, as well as the risks and considerations
described in the accompanying prospectus, in the accompanying prospectus supplement, under Additional Risk Factors Specific to the Notes in the accompanying general terms supplement no. 24 and under Additional Risk Factors Specific
to the Underlier-Linked Notes in the accompanying product supplement no. 28. You should carefully review these risks and considerations as well as the terms of the notes described herein and in the accompanying prospectus, the accompanying
prospectus supplement, the accompanying general terms supplement no. 24 and the accompanying product supplement no. 28. Your notes are a riskier investment than ordinary debt securities. Also, your notes are not equivalent to investing directly in
the underlier stocks, i.e., the stocks comprising the underlier to which your notes are linked. You should carefully consider whether the offered notes are suited to your particular circumstances.
The Estimated Value of Your Notes At the Time the Terms of Your Notes Are Set On the Trade Date (as Determined By Reference to Pricing Models
Used By GS&Co.) Is Less Than the Original Issue Price Of Your Notes
The original issue price for your notes exceeds the estimated value of your
notes as of the time the terms of your notes are set on the trade date, as determined by reference to GS&Co.s pricing models and taking into account our credit spreads. Such estimated value on the trade date is set forth above under
Estimated Value of Your Notes
; after the trade date, the estimated value as determined by reference to these models will be affected by changes in market conditions, the creditworthiness of GS Finance Corp., as issuer, and the
creditworthiness of The Goldman Sachs Group, Inc., as guarantor, and other relevant factors. The price at which GS&Co. would initially buy or sell your notes (if GS&Co. makes a market, which it is not obligated to do), and the value that
GS&Co. will initially use for account statements and otherwise, also exceeds the estimated value of your notes as determined by reference to these models. As agreed by GS&Co. and the distribution participants, the amount of this excess will
decline on a straight line basis over the period from the date hereof through the applicable date set forth above under Estimated Value of Your Notes. Thereafter, if GS&Co. buys or sells your notes it will do so at prices that
reflect the estimated value determined by reference to such pricing models at that time. The price at which GS&Co. will buy or sell your notes at any time also will reflect its then current bid and ask spread for similar sized trades of
structured notes.
In estimating the value of your notes as of the time the terms of your notes are set on the trade date, as disclosed above
under Estimated Value of Your Notes
, GS&Co.s pricing models consider certain variables, including principally our credit spreads, interest rates (forecasted, current and historical rates), volatility, price-sensitivity
analysis and the time to maturity of the notes. These pricing models are proprietary and rely in part on certain assumptions about future events, which may prove to be incorrect. As a result, the actual value you would receive if you sold your notes
in the secondary market, if any, to others may differ, perhaps materially, from the estimated value of your notes determined by reference to our models due to, among other things, any differences in pricing models or assumptions used by others. See
Additional Risk Factors Specific to the Underlier-Linked Notes The Market Value of Your Notes May Be Influenced by Many Unpredictable Factors on page S-32 of the accompanying product supplement no. 28.
The difference between the estimated value of your notes as of the time the terms of your notes are set on the trade date and the original issue price is a result
of certain factors, including principally the underwriting discount and commissions, the expenses incurred in creating, documenting and marketing the notes, and an estimate of the difference between the amounts we pay to GS&Co. and the amounts
GS&Co. pays to us in connection with your notes. We pay to GS&Co. amounts based on what we would pay to holders of a non-structured note with a similar maturity. In return for such payment, GS&Co. pays to us the amounts we owe under your
notes.
In addition to the factors discussed above, the value and quoted price of your notes at any time will reflect many factors and cannot be
predicted. If GS&Co. makes a market in the notes, the price quoted by GS&Co. would reflect any changes in market conditions and other relevant factors, including any deterioration in our creditworthiness or perceived creditworthiness or the
creditworthiness or perceived
PS-12
creditworthiness of The Goldman Sachs Group, Inc. These changes may adversely affect the value of your notes, including the price you may receive for your notes in any market making transaction.
To the extent that GS&Co. makes a market in the notes, the quoted price will reflect the estimated value determined by reference to GS&Co.s pricing models at that time, plus or minus its then current bid and ask spread for similar
sized trades of structured notes (and subject to the declining excess amount described above).
Furthermore, if you sell your notes, you will likely be
charged a commission for secondary market transactions, or the price will likely reflect a dealer discount. This commission or discount will further reduce the proceeds you would receive for your notes in a secondary market sale.
There is no assurance that GS&Co. or any other party will be willing to purchase your notes at any price and, in this regard, GS&Co. is not obligated to
make a market in the notes. See Additional Risk Factors Specific to the Underlier-Linked Notes Your Notes May Not Have an Active Trading Market on page S-31 of the accompanying product supplement no. 28.
The Notes Are Subject to the Credit Risk of the Issuer and the Guarantor
Although the return on the notes will be based on the performance of the underlier, the payment of any amount due on the notes is subject to the credit risk of GS Finance Corp., as issuer of the notes, and the
credit risk of The Goldman Sachs Group, Inc. as guarantor of the notes. The notes are our unsecured obligations. Investors are dependent on our ability to pay all amounts due on the notes, and therefore investors are subject to our credit risk and
to changes in the markets view of our creditworthiness. Similarly, investors are dependent on the ability of The Goldman Sachs Group, Inc., as guarantor of the notes, to pay all amounts due on the notes, and therefore are also subject to its
credit risk and to changes in the markets view of its creditworthiness. See Description of the Notes We May Offer Information About Our Medium-Term Notes, Series E Program How the Notes Rank Against Other Debt on page
S-4 of the accompanying prospectus supplement and Description of Debt Securities We May Offer Guarantee by The Goldman Sachs Group, Inc. on page 33 of the accompanying prospectus.
The Amount Payable on Your Notes Is Not Linked to the Level of the Underlier at Any Time Other than the Determination Date
The final underlier level will be based on the closing level of the underlier on the determination date (subject to adjustment as described elsewhere in this
pricing supplement). Therefore, if the closing level of the underlier dropped precipitously on the determination date, the cash settlement amount for your notes may be significantly less than it would have been had the cash settlement amount been
linked to the closing level of the underlier prior to such drop in the level of the underlier. Although the actual level of the underlier on the stated maturity date or at other times during the life of your notes may be higher than the final
underlier level, you will not benefit from the closing level of the underlier at any time other than on the determination date.
You
May Lose Your Entire Investment in the Notes
You can lose your entire investment in the notes. The cash payment on your notes, if any, on the
stated maturity date will be based on the performance of the S&P Banks Select Industry Index as measured from the initial underlier level to the closing level on the determination date. If the final underlier level is
less than
the
initial underlier level, you will have a loss for each $1,000 of the face amount of your notes equal to the
product
of the underlier return
times
$1,000. Thus, you may lose your entire investment in the notes, which would include any
premium to face amount you paid when you purchased the notes.
Also, the market price of your notes prior to the stated maturity date may be
significantly lower than the purchase price you pay for your notes. Consequently, if you sell your notes before the stated maturity date, you may receive far less than the amount of your investment in the notes.
Your Notes Do Not Bear Interest
You will
not receive any interest payments on your notes. As a result, even if the cash settlement amount payable for your notes on the stated maturity date exceeds the face amount of your notes, the overall return you earn on your notes may be less than you
would have earned by investing in a non-indexed debt security of comparable maturity that bears interest at a prevailing market rate.
PS-13
The Potential for the Value of Your Notes to Increase Will Be Limited
Your ability to participate in any change in the value of the underlier over the life of your notes will be limited because of the cap level. The maximum
settlement amount will limit the cash settlement amount you may receive for each of your notes at maturity, no matter how much the level of the underlier may rise beyond the cap level over the life of your notes. Accordingly, the amount payable for
each of your notes may be significantly less than it would have been had you invested directly in the underlier.
You Have No
Shareholder Rights or Rights to Receive Any Underlier Stock
Investing in your notes will not make you a holder of any of the underlier stocks.
Neither you nor any other holder or owner of your notes will have any rights with respect to the underlier stocks, including voting rights, any right to receive dividends or other distributions, any rights to make a claim against the underlier
stocks or any other rights of a holder of the underlier stocks. Your notes will be paid in cash and you will have no right to receive delivery of any underlier stocks.
We May Sell an Additional Aggregate Face Amount of the Notes at a Different Issue Price
At our sole option,
we may decide to sell an additional aggregate face amount of the notes subsequent to the date of this pricing supplement. The issue price of the notes in the subsequent sale may differ substantially (higher or lower) from the original issue price
you paid as provided on the cover of this pricing supplement.
If You Purchase Your Notes at a Premium to Face Amount, the Return on
Your Investment Will Be Lower Than the Return on Notes Purchased at Face Amount and the Impact of Certain Key Terms of the Notes Will be Negatively Affected
The cash settlement amount will not be adjusted based on the issue price you pay for the notes. If you purchase notes at a price that differs from the face amount of the notes, then the return on your investment in
such notes held to the stated maturity date will differ from, and may be substantially less than, the return on notes purchased at face amount. If you purchase your notes at a premium to face amount and hold them to the stated maturity date, the
return on your investment in the notes will be lower than it would have been had you purchased the notes at face amount or a discount to face amount. In addition, the impact of the cap level on the return on your investment will depend upon the
price you pay for your notes relative to face amount. For example, if you purchase your notes at a premium to face amount, the cap level will only permit a lower positive return in your investment in the notes than would have been the case for notes
purchased at face amount or a discount to face amount.
The Performance of the S&P Banks Select Industry Index Is Likely To Differ
from the Performance of the S&P Total Market Index
Although the S&P Banks Select Industry Index consists of companies drawn from the
universe of companies included in the S&P Total Market Index, the companies comprising the S&P Banks Select Industry Index represent only certain sub-industries as further described below. As a result, the performance of the S&P Banks
Select Industry Index is likely to differ from the performance of the S&P Total Market Index because the composition and weighting of the S&P Banks Select Industry Index differs markedly from the composition and weighting of the S&P
Total Market Index. As a result, the return on the notes will not be the same as a debt security with a payment at maturity based on the performance of the S&P Total Market Index.
The S&P Banks Select Industry Index Is Concentrated in the Banking Sector and Related Sub-Industries
All or substantially all of the stocks that are included in the S&P Banks Select Industry Index are issued by companies that are classified in the GICS asset
management & custody banks, diversified banks, regional banks, other diversified financial services and thrifts & mortgage finance sub-industries. Because the value of the notes is based on the performance of the S&P Banks
Select Industry Index, an investment in these notes will be concentrated in the banking sector and the related sub-industries. As a result, the value of the notes may be subject to greater volatility and may be more adversely affected by a single
economic, political or regulatory occurrence affecting the banking industry or one of the related sub-industries included in the S&P Banks Select Industry Index than a different investment linked to securities of a more broadly diversified group
of companies.
PS-14
Your Notes May Be Subject to an Adverse Change in Tax Treatment in the Future
The Internal Revenue Service announced on December 7, 2007 that it is considering issuing guidance regarding the proper U.S. federal income tax treatment of
an instrument such as your notes that are currently characterized as pre-paid derivative contracts, and any such guidance could adversely affect the tax treatment and the value of your notes. Among other things, the Internal Revenue Service may
decide to require the holders to accrue ordinary income on a current basis and recognize ordinary income on payment at maturity, and could subject non-U.S. investors to withholding tax. Furthermore, in 2007, legislation was introduced in Congress
that, if enacted, would have required holders that acquired instruments such as your notes after the bill was enacted to accrue interest income over the term of such instruments even though there will be no interest payments over the term of such
instruments. It is not possible to predict whether a similar or identical bill will be enacted in the future, or whether any such bill would affect the tax treatment of your notes. We describe these developments in more detail under
Supplemental Discussion of Federal Income Tax Consequences on page S-42 of the accompanying product supplement no. 28. You should consult your tax advisor about this matter. Except to the extent otherwise provided by law, GS Finance
Corp. intends to continue treating the notes for U.S. federal income tax purposes in accordance with the treatment described under Supplemental Discussion of Federal Income Tax Consequences on page S-42 of the accompanying product
supplement no. 28 unless and until such time as Congress, the Treasury Department or the Internal Revenue Service determine that some other treatment is more appropriate.
United States Alien Holders Should Consider the Withholding Tax Implications of Owning the Notes
The Treasury
Department has issued regulations under which amounts paid or deemed paid on certain financial instruments (871(m) financial instruments) that are treated as attributable to U.S.-source dividends could be treated, in whole or in part
depending on the circumstances, as a dividend equivalent payment that is subject to tax at a rate of 30% (or a lower rate under an applicable treaty), which in the case of any amounts a United States alien holder receives upon the sale,
exchange or maturity of the notes, could be collected via withholding. If these regulations were to apply to the notes, we may be required to withhold such taxes if any U.S.-source dividends are paid on the stocks included in the underlier during
the term of the notes. We could also require a United States alien holder to make certifications (e.g., an applicable Internal Revenue Service Form W-8) prior to the maturity of the notes in order to avoid or minimize withholding obligations, and we
could withhold accordingly (subject to the United States alien holders potential right to claim a refund from the Internal Revenue Service) if such certifications were not received or were not satisfactory. If withholding was required, we
would not be required to pay any additional amounts with respect to amounts so withheld. These regulations generally will apply to 871(m) financial instruments (or a combination of financial instruments treated as having been entered into in
connection with each other) issued (or significantly modified and treated as retired and reissued) on or after January 1, 2018, but will also apply to certain 871(m) financial instruments (or a combination of financial instruments treated as
having been entered into in connection with each other) that have a delta (as defined in the applicable Treasury regulations) of one and are issued (or significantly modified and treated as retired and reissued) on or after January 1, 2017. In
addition, these regulations will not apply to financial instruments that reference a qualified index (as defined in the regulations). We have determined that, as of the issue date of your notes, your notes will not be subject to
withholding under these rules. In certain limited circumstances, however, you should be aware that it is possible for United States alien holders to be liable for tax under these rules with respect to a combination of transactions treated as having
been entered into in connection with each other even when no withholding is required. You should consult your tax advisor concerning these regulations, subsequent official guidance and regarding any other possible alternative characterizations of
your notes for U.S. federal income tax purposes.
Foreign Account Tax Compliance Act (FATCA) Withholding May Apply to Payments on Your
Notes, Including as a Result of the Failure of the Bank or Broker Through Which You Hold the Notes to Provide Information to Tax Authorities
Please
see the discussion under United States Taxation Taxation of Debt Securities Foreign Account Tax Compliance Act (FATCA) Withholding in the accompanying prospectus for a description of the applicability of FATCA to payments
made on your notes.
PS-15
THE UNDERLIER
The S&P Banks Select Industry Index (Bloomberg symbol, SPSIBK Index) is managed by S&P Dow Jones Indices
LLC (S&P) and is an equal-weighted index that is designed to measure the performance of stocks in the S&P Total Market Index that are classified under the Global Industry Classification Standard (GICS
®
) in the asset management & custody banks, diversified banks, regional
banks, other diversified financial services and thrifts & mortgage finance sub-industries. The S&P Total Market Index tracks all U.S. common stocks with a primary listing on the NYSE, NYSE Arca, NYSE MKT, NASDAQ Global Select Market,
NASDAQ Select Market, NASDAQ Capital Market, Bats BZX, Bats BYX, Bats EDGA or Bats EDGX exchanges. The index is one of the 25 sub-industry sector indices S&P maintains that are derived from a portion of the stocks comprising the S&P Total
Market Index. An equal-weighted index is one where every stock has the same weight in the index. As such, the index must be rebalanced from time to time to re-establish the proper weighting.
Eligibility for Inclusion in the Index
Selection for the index is based on a companys GICS
®
classification, as well as
liquidity and market capitalization requirements. In addition, only U.S. companies are eligible for inclusion in the index.
GICS
®
classifications are determined by S&P using criteria it has selected or developed. Index and classification
system sponsors may use very different standards for determining sector designations. In addition, many companies operate in a number of sectors, but are listed only in one sector. As a result, sector comparisons between indices with different
sponsors may reflect differences in methodology as well as actual differences in the sector composition of the indices.
To be eligible
for inclusion in the index, stocks must be in the S&P Total Market Index and have a float-adjusted market capitalization above $2 billion with a float-adjusted liquidity ratio above 100%. The float-adjusted liquidity ratio is defined as the
dollar value traded over the previous 12 months divided by the float-adjusted market capitalization as of the indexs rebalancing reference date.
All stocks in the related GICS
®
sub-industries satisfying the above requirements are
included in the index and the total number of stocks in the index should be at least 35. If there are fewer than 35 stocks in the index, the market capitalization requirements may be relaxed to reach at least 22 stocks.
With respect to liquidity, the length of time to evaluate liquidity is reduced to the available trading period for companies that recently became
public or companies that were spun-off from other companies, the stocks of which therefore do not have 12 months of trading history.
Current Composition of the Index
As of December 30, 2016, the index was comprised of the stocks of 68 companies.
As of
January 4, 2017, the top ten constituents of the index and their relative weights in the index were as follows: SVB Financial Group (2.39%), First Republic Bank (2.38%), PNC Financial Services Group (2.36%), Bank of the Ozarks Inc. (2.35%),
SunTrust Banks Inc. (2.34%), Citigroup Inc. (2.33%), Citizens Financial Group (2.33%), CIT Group Inc. (2.33%), Fifth Third Bankcorp (2.33%), and M&T Bank Corp (2.33%).
Calculation of the Index
The index is calculated as the index market value divided by the
divisor. Given the index is an equal-weighted index, the market capitalization of each stock used in the calculation of the index market value is redefined so that each stock has an equal weight in the index on each rebalancing date. The adjusted
market capitalization for each stock in the index is calculated as the product of the stock price, the number of shares outstanding, the stocks float factor and the adjustment factor.
PS-16
A stocks float factor refers to the number of shares outstanding that are available to
investors. S&P indices exclude shares closely held by control groups from the index calculation because such shares are not available to investors. For each stock, S&P calculates an Investable Weight Factor (IWF) which is the percentage of
total shares outstanding that are included in the index calculation.
The adjustment factor for each stock is assigned at each
rebalancing date and is calculated by dividing a specific constant set for the purpose of deriving the adjustment factor (often referred to as modified index shares) by the number of stocks in the index multiplied by the float adjusted market value
of such stock on such rebalancing date.
Adjustments are also made to ensure that no stock in the index will have a weight that exceeds
the value that can be traded in a single day for a theoretical portfolio of $2 billion. Theoretical portfolio values are reviewed annually and any updates are made at the discretion of the index committee, as defined below. The maximum basket
liquidity weight for each stock in the index will be calculated using the ratio of its three-month median daily value traded to the theoretical portfolio value of $2 billion. Each stocks weight in the index is then compared to its maximum
basket liquidity weight and is set to the lesser of (1) its maximum basket liquidity weight or (2) its initial equal weight. All excess weight is redistributed across the index to the uncapped stocks. If necessary, a final adjustment is
made to ensure that no stock in the index has a weight greater than 4.5%. No further adjustments are made if the latter step would force the weight of those stocks limited to their maximum basket liquidity weight to exceed that weight. If the index
contains exactly 22 stocks as of the rebalancing effective date, the index will be equally weighted without basket liquidity constraints.
If a company has more than one share class line in the S&P Total Market Index, such company will be represented once by the primary listing
(generally the most liquid share line). In the event that a company issues a secondary share class to the index share class holders by means of a mandatory distribution, the newly issued share class line will be added to the index on the
distribution ex-date, provided that the distributed class is not considered to be de minimis. Both share class lines will then remain in the index until the next rebalancing, at which time only the primary share class line will be considered for
continued inclusion.
The index is calculated by using the divisor methodology used in all S&P equity indices. The initial divisor
was set to have a base value of 1,000 on June 20, 2003. The index level is the index market value divided by the index divisor. In order to maintain index series continuity, it is also necessary to adjust the divisor at each rebalancing.
Therefore, the divisor (after rebalancing) equals the index market value (after rebalancing) divided by the index value before rebalancing. The divisor keeps the index comparable over time and is one manipulation point for adjustments to the index,
which we refer to as maintenance of the index.
Maintenance of the Index
The composition of the index is reviewed quarterly. Rebalancing occurs after the closing of the relevant U.S. trading markets
on the third Friday of the month ending that quarter. The reference date for float-adjusted market capitalization and the float-adjusted liquidity ratio is after the closing of the last trading day of the previous month. The reference date for GICS
®
classification is as of the rebalancing effective date. Existing stocks in the index are removed at the quarterly rebalancing
if either their float-adjusted capitalization falls below $1 billion or their float-adjusted liquidity ratio falls below 50%. A company will also be deleted from the index if the S&P Total Market Index deletes that company. Companies are added
between rebalancings only if a company deletion causes the number of companies in the index to fall below 22. The newly added company will be added to the index at the weight of the deleted company. If the stock was deleted at $0.00, the newly added
stock will be added at the deleted stocks previous days closing value (or the most immediate prior business day that the deleted stock was not valued at $0.00) and an adjustment to the divisor will be made (only in the case of stocks
removed at $0.00). At the next rebalancing, the index will be rebalanced based on the eligibility requirements and equal-weight methodology discussed above. In the case of GICS
®
changes, where a stock no longer qualifies to belong to the index after the classification change, it is
PS-17
removed from the index on the next rebalancing date. In the case of a spin-off, the spin-off company will be added to
the index at a zero price after the close of the trading on the day before the ex-date. In general and subject to certain exceptions, both the parent company and spin-off companies will remain in the index until the next index rebalancing.
In the case of mergers involving two index constituents, the merged entity will remain in the index provided that it meets all general
eligibility requirements. The merged entity will be added to the index at the weight of the stock deemed to be the surviving stock in the transaction. The surviving stock will not experience a weight change and its subsequent weight will not be
equal to that of the pre-merger weight of the merged entities.
Adjustments are made to the index in the event of certain corporate actions relating to
the stocks included in the index, such as spin-offs, rights offerings, stock splits and special dividends, as specified below.
The table below
summarizes the types of index maintenance adjustments:
|
|
|
|
|
Type of Corporate Action
|
|
Adjustment Factor
|
|
Divisor Adjustment Required
|
|
|
|
Spin-Off
|
|
In general and subject to certain
exceptions, both
the parent stock and spin-off stocks will remain in the index until the next index rebalancing, regardless of whether they
conform to the theme of the
index.
|
|
No
|
|
|
|
Rights Offering
|
|
Price is adjusted to equal (i) price of parent company minus (ii) price of rights subscription divided by the rights ratio.
|
|
No
|
|
|
|
Stock split (e.g., 2-for-1), stock dividend or reverse stock split
|
|
Index shares multiplied by split factor (i.e., 2); stock price divided by split factor (i.e., 2)
|
|
No
|
|
|
|
Share issuance or share repurchase
|
|
None
|
|
No
|
|
|
|
Special dividends
|
|
Price of the stock making the special dividend payment is reduced by the per share special dividend amount after the close of trading on the day before the dividend ex-date.
|
|
Yes
|
Index Committee
The Americas Thematic and Strategy Index Committee (the index committee) maintains the index and consists of full-time professional members of S&P staff. At monthly meetings, the index committee
reviews pending corporate actions that may affect index constituents, statistics comparing the composition of the indices to the market, companies that are being considered as candidates for additions to the index and any significant market events.
The index committee may also revise index policy, such as the rules for selecting constituents, the treatment of dividends, share counts or other matters.
Unscheduled Market Closures
In situations where an exchange is forced to close early due to
unforeseen events, such as computer or electric power failures, weather conditions or other events, S&P will calculate the closing price of the stocks in the index based on (1) the closing prices published by the exchange, or (2) if no
closing price is available, the last regular trade reported before the exchange closed. In all cases, the prices will be from the primary exchange for each stock in the index. If an exchange for a stock fails to
PS-18
open due to unforeseen circumstances, S&P will use the prior days closing prices for such stock. If all exchanges fail to open, S&P may determine not to publish the index for that
day.
License Agreement between S&P and GS Finance Corp.
S&P Banks Select Industry Index is a product of S&P Dow Jones Indices LLC, and has been licensed for use
by GS Finance Corp. (Goldman). Standard & Poors
®
and S&P
®
are registered trademarks of Standard & Poors Financial Services LLC; Dow Jones
®
is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones) and these trademarks have been
licensed for use by S&P Dow Jones Indices LLC and sublicensed for certain purposes by Goldman. Goldmans notes are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, Standard & Poors
Financial Services LLC or any of their respective affiliates (collectively, S&P Dow Jones Indices). S&P Dow Jones Indices makes no representation or warranty, express or implied, to the owners of the notes or any member of the
public regarding the advisability of investing in securities generally or in the notes particularly or the ability of S&P Banks Select Industry Index to track general market performance. S&P Dow Jones Indices only relationship to
Goldman with respect to S&P Banks Select Industry Index is the licensing of S&P Banks Select Industry Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. S&P Banks
Select Industry Index is determined, composed and calculated by S&P Dow Jones Indices without regard to Goldman or the notes
.
S&P Dow Jones Indices have no obligation to take the needs of Goldman or the owners of the notes
into consideration in determining, composing or calculating S&P Banks Select Industry Index. S&P Dow Jones Indices are not responsible for and have not participated in the determination of the prices, and amount of the notes or the
timing of the issuance or sale of the notes or in the determination or calculation of the equation by which the notes are to be converted into cash. S&P Dow Jones Indices have no obligation or liability in connection with the administration,
marketing or trading of the notes. There is no assurance that investment products based on S&P Banks Select Industry Index will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC is not
an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice.
S&P DOW JONES INDICES DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF S&P BANKS SELECT INDUSTRY INDEX
OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR
ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY
GOLDMAN, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF S&P BANKS SELECT INDUSTRY INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES
INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES,
WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND GOLDMAN, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.
Historical Closing Levels of the Underlier
The closing level of the underlier has fluctuated in the past and may, in the future, experience significant fluctuations. Any historical upward or downward trend in the closing level of the underlier during the
period shown below is not an indication that the underlier is more or less likely to increase or decrease at any time during the life of your notes.
You should not take the historical levels of the underlier as an indication of the future performance of the underlier.
We cannot give you any assurance
that the future performance of the
PS-19
underlier or the underlier stocks will result in your receiving an amount greater than the outstanding face amount of your notes on the stated maturity date.
Neither we nor any of our affiliates make any representation to you as to the performance of the underlier. Before investing in the offered notes, you should
consult publicly available information to determine the levels of the underlier between the date of this pricing supplement and the date of your purchase of the offered notes. The actual performance of the underlier over the life of the offered
notes, as well as the cash settlement amount, may bear little relation to the historical closing levels shown below.
The graph below shows the daily
historical closing levels of the underlier from January 12, 2007 through January 12, 2017. We obtained the closing levels in the graph below from Bloomberg Financial Services, without independent verification.
PS-20
Historical Performance of the S&P Banks Select Industry Index
PS-21
VALIDITY OF THE NOTES AND GUARANTEE
In the opinion of Sidley Austin
LLP
, as counsel to GS Finance Corp. and The Goldman Sachs Group, Inc., when the notes offered by this pricing
supplement have been executed and issued by GS Finance Corp., the related guarantee offered by this pricing supplement has been executed and issued by The Goldman Sachs Group, Inc., and such notes have been authenticated by the trustee pursuant to
the indenture, and such notes and the guarantee have been delivered against payment as contemplated herein, (a) such notes will be valid and binding obligations of GS Finance Corp., enforceable in accordance with their terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the
lack of bad faith), provided that such counsel expresses no opinion as to the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above and (b) such related guarantee will be
a valid and binding obligation of The Goldman Sachs Group, Inc., enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors rights generally, concepts of reasonableness and
equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith), provided that such counsel expresses no opinion as to the effect of fraudulent conveyance, fraudulent
transfer or similar provision of applicable law on the conclusions expressed above. This opinion is given as of the date hereof and is limited to the laws of the State of New York and the General Corporation Law of the State of Delaware as in effect
on the date hereof. In addition, this opinion is subject to customary assumptions about the trustees authorization, execution and delivery of the indenture and the genuineness of signatures and certain factual matters, all as stated in the
letter of such counsel dated February 26, 2015, which has been filed as an exhibit to a Current Report on Form 8-K, dated February 26, 2015, filed by The Goldman Sachs Group, Inc. on February 26, 2015.
PS-22
We have not authorized anyone to provide any information or to make any representations other than those contained or
incorporated by reference in this pricing supplement, the accompanying product supplement no. 28, the accompanying general terms supplement no. 24, the accompanying prospectus supplement or the accompanying prospectus. We take no responsibility for,
and can provide no assurance as to the reliability of, any other information that others may give you. This pricing supplement, the accompanying product supplement no. 28, the accompanying general terms supplement no. 24, the accompanying prospectus
supplement and the accompanying prospectus is an offer to sell only the notes offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this pricing supplement, the accompanying
product supplement no. 28, the accompanying general terms supplement no. 24, the accompanying prospectus supplement and the accompanying prospectus is current only as of the respective dates of such documents.
TABLE OF CONTENTS
Pricing Supplement
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Page
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Summary Information
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PS-5
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Hypothetical Examples
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PS-8
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Additional Risk Factors Specific to Your Notes
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PS-12
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The Underlier
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PS-16
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Validity of the Notes and Guarantee
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PS-22
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Product Supplement No. 28 dated December 22, 2015
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Summary Information
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S-1
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Hypothetical Returns on the Underlier-Linked Notes
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S-10
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Additional Risk Factors Specific to the Underlier-Linked Notes
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S-30
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General Terms of the Underlier-Linked Notes
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S-35
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Use of Proceeds
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S-40
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Hedging
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S-40
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Supplemental Discussion of Federal Income Tax Consequences
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S-42
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Employee Retirement Income Security Act
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S-49
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Supplemental Plan of Distribution
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S-50
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Conflicts of Interest
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S-52
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General Terms Supplement No. 24 dated December 22, 2015
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Additional Risk Factors Specific to the Notes
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S-1
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Supplemental Terms of the Notes
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S-15
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The Underliers
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S-35
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S&P 500
®
Index
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S-39
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MSCI Indices
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S-45
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Hang Seng China Enterprises Index
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S-54
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Russell
2000
®
Index
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S-59
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FTSE
®
100
Index
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S-67
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EURO STOXX
50
®
Index
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S-73
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TOPIX
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S-80
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The Dow Jones Industrial Average
TM
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S-86
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The iShares
®
MSCI Emerging Markets ETF
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S-90
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Use of Proceeds
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S-92
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Hedging
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S-92
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Employee Retirement Income Security Act
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S-93
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Supplemental Plan of Distribution
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S-94
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Conflicts of Interest
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S-96
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Prospectus Supplement dated December 22, 2015
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Use of Proceeds
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S-2
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Description of Notes We May Offer
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S-3
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Considerations Relating to Indexed Notes
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S-16
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United States Taxation
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S-17
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Employee Retirement Income Security Act
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S-18
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Supplemental Plan of Distribution
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S-19
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Validity of the Notes and Guarantees
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S-19
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Prospectus dated December 22, 2015
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Available Information
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2
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Prospectus Summary
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3
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Risks Relating to Regulatory Resolution Strategies and Long-Term Debt Requirements
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6
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Use of Proceeds
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7
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Description of Debt Securities We May Offer
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8
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Description of Warrants We May Offer
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35
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Description of Units We May Offer
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47
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GS Finance Corp.
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51
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Legal Ownership and Book-Entry Issuance
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53
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Considerations Relating to Floating Rate Debt Securities
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57
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Considerations Relating to Indexed Securities
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58
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Considerations Relating to Securities Denominated or Payable in or Linked to a Non-U.S. Dollar Currency
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61
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United States Taxation
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64
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Plan of Distribution
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76
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Conflicts of Interest
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78
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Employee Retirement Income Security Act
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78
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Validity of the Securities and Guarantees
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79
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Experts
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79
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Review of Unaudited Condensed Consolidated Financial Statements by Independent Registered Public Accounting Firm
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79
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Cautionary Statement Pursuant to the Private Securities Litigation Reform Act of 1995
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79
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$5,660,000
GS Finance Corp.
Leveraged S&P Banks Select Industry Index-Linked Notes due 2018
guaranteed by
The
Goldman Sachs Group, Inc.
Goldman, Sachs & Co.
Goldman Sachs (NYSE:GS)
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